Newsletters
January 19, 2016
Market Update
The markets are off to a rough start in 2016, and we wanted to pass along a few of our thoughts. Most importantly, if you have any questions about your investments, do not hesitate to call or email, we are here to answer questions and discuss your specific situation.
As always, there are numerous factors that have an impact on the market; domestically, many figures seem to be pointing in a positive direction. The job numbers over the last few months have been strong while the unemployment number continues to remain healthy at 5%*. Additionally, the low cost of oil means cheaper gas at the pump – which puts more money in the hands of consumers.
Recently, it seems the investors are more concerned with a handful of other issues that have been putting pressure on the market. The fact that oil is trading at such a low cost is beneficial for many consumers and companies, especially those in transportation and manufacturing. However, oil dropping as far as it has is leading to fears of job loss and potential bankruptcies in the energy sector. Other countries whose economies are more heavily dependent on the price of oil and other commodities than that of the United States are feeling an even heavier drag.
The slowing growth of China has probably been the biggest challenge to the market so far this year. It seems as the Chinese market fell day by day so did the US markets. The Chinese government is doing a lot to try to steer the Chinese economy. In the long run, eventually the Chinese economy will mature and change as they continue to grow and evolve into a more consumer based economy.
Continued and spreading violence in the Middle East is another factor that appears to be affecting the markets. Unfortunately, violence in the Middle East is nothing new, however, the spreading reach of groups like ISIS, and the immigration and humanitarian issues have recently garnered more headlines.
This commentary is not an alarm bell or panic button, markets will have their ups and downs. There is no clear path to where the market is currently heading, we have had a solid bull run in the market from 2009 to 2015 and a pull back at some point is to be expected.
As a brief insight into a couple of the asset managers we utilize, both Morningstar Managed Portfolios and Ladenburg Thallman have been underweight equities, with an increased allocation to cash and bonds. This has, so far, helped their relative performance for the year. We encourage you to call in to hear more details from these asset managers as they host their client conference calls in the coming weeks.
As always we continue to stress the most important thing we can work on together is ensuring your investments risk profiles are aligned with your goals. Please do not hesitate to call or email with any questions you may have. We hope you have a wonderful 2016.
*Source United States Department of Labor
December 18, 2015
Federal Reserve Rate Increase
Yesterday the Federal Reserve announced that they will begin the process of raising short term interest rates. This move has been anticipated by the markets for quite some time and does not come as a surprise. The Fed has predicted that they anticipate raising rates slowly over the coming years with increases averaging around 1% annually with rates reaching over 3% by 2019.
We tend to agree with consensus that a rate increase is the correct move for the reserve to make at this time. Hopefully, removing some uncertainly around the timing of rate increases will allow the economy to continue to move forward. In the short term we do not anticipate too many changes; mortgages will likely continue at historically low rates, while interest paid on CDs and bank accounts is unlikely to drastically change in the near term. Because a rate increase has been anticipated for such a long period of time I would expect to see very few changes in allocations from the asset managers we utilize.
As always we are here to answer any questions you might have. If you have an interest in reading more details regarding the rate increase the NY Times article linked below is fairly comprehensive.
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June 30, 2015
Our Thoughts on the Situation in Greece
With the heavy news coverage surrounding the current issues in Greece and an uncertain outcome that seems to change by the hour, we wanted to provide you with our comments on the situation.
First and foremost, it’s at times like these when we feel it’s most important for individuals to have a current financial plan in place. A financial plan provides individuals with confidence to stay the course, knowing that the allocation of their assets is appropriate for their risk tolerance and time horizon.
We also believe these moments are when third party money managers add value to our clients’ portfolios. These asset managers have access to vast amounts of research and resources which they utilize in an effort to add value to our clients’ portfolios through tactical allocation changes. (Here’s what Ladenburg Thalmann released on the topic.)
At this point, the outcome in Greece is still far from certain. What we do know is that Greece faces tough decisions that will impact the future of not only their country, but also the European Union and the rest of the world. Among the possible outcomes, Greece could accept further austerity measures and receive another bail out, or they could default on their debt and exit the European Union. The latter would most likely have the greatest impact on global markets.
To understand how a Greek exit could affect global markets is truly an interesting study in economics. While the Greek economy itself is relatively small, a departure from the Euro may cause investors to perceive other larger European economies as more risky, thus potentially increasing the borrowing costs to these nations and perhaps dampening their economic recovery. It could also cause another economic recession in Europe. The troubles with the Greek economy have been known for years and the current situation does not truly come as a surprise, so it’s widely believed that financial institutions have already made adjustments to account for such an outcome—thus potentially limiting the fallout of a Greek exit.
The possibility remains that the Greek government will agree to further austerity measures and receive a bail out. As we have seen many times in U.S. politics (remember the fiscal cliff?) and abroad, it’s often not until the very last possible moment—after playing a game of political chicken—that both sides reach the conclusion that coming to an agreement is the best possible outcome.
There’s a lot of news on this topic, and while this email isn’t a comprehensive, in-depth analysis, I hope it provides a easy-to-understand, big-picture overview. Remember the fundamentals of investing and the importance of focusing on your financial goals. Even with the sell-off in the markets yesterday, the S&P 500 was still up .9% year-to-date, while the MSCI EFA was up 6.26% year-to-date.
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